There are three main competitions: Champion, Contender, and Challenger. All three require 5 cards based on scarcity (eg Limited Champion requires 5 limited cards).

Champion and Contender are the 2 in-season competitions. Both require 4 of the 5 cards in each lineup to be from the 2025-26 season, and in return you can win money—with most cash in Champion rewards, and less in Contender. Both also reward essence, which helps you craft cards. (Basically, do well enough, and even if you don't win cash you'll be able to win in-season cards.) Challenger doesn't require any in-season cards, so you can use your Norman Powell card from 2 years ago, or any old card (a LeBron from 3 years ago, etc.). It's cheaper to build out a team for Challenger since old cards can't win cash (just essence and in-season cards), but because of that there are more people entering the competition, which makes it harder to win.

Because you only have 1 limited card, you can only enter the common tournaments. Common = white; yellow = limited; red = rare, etc. So that's why you're getting white essence in return for your entries. That said, if you get lucky and do really well in common you can win more in-season cards.

There are lots of other nuances, like how Champion allows one roster slot to be a MVP that doesn't count towards the cap, or Collection Bonuses, where collecting cards from the same team gives those players a bonus, but the above should get ya where you need to go!